Periodic review inventory control method for a single item

Given the following data, which quantity is necessary to place at the review time if the current stock is 5000 units?

d = 3000 (monthly demand forecast)

S’d = 467

LT = 120 days (replenishment lead time)

Item value = 0.65€/unit

S = 7€ per order

I = 15% per month

P = 92% (in-stock probability during lead time)

Answer:

First at all, we need to know the review time T* = Q*/D

Q* = 656.33 units

T* = 656.33/3000 = 0.21 (aprox. 25% of a month, one week)

S’ = 958.203 units

M’ = 13981.067

13981-current stock = 13981-5000 = 8981 units

By: Lorena Ubeda

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